According to Dom.RF, as of September 1, 17% of equity participation agreements had not been paid, and the amount not received into escrow accounts has increased since the beginning of the year by 0.2 trillion rubles to 1.5 trillion.
The growth came amid declining demand for new buildings: in the second quarter, a quarter of apartments were sold on installment plans. A survey by Dom.RF, VCIOM, and the Institute for the Development of the Construction Industry showed that 94% of developers used installment plans, and for 30% of them, such deals accounted for more than a quarter of concluded equity participation agreements.
On average, installment plans accounted for 27% of all active equity participation agreements among respondents, with mid-sized companies having a share of such deals reaching 38%, while for small and large developers it was almost twice as low. Expert RA analyst Yury Belikov linked the growth in demand for installment plans to worsening mortgage affordability, high market rates of around 18%, and expectations of deteriorating family mortgage terms starting in October.
At Dom.RF and the Bank of Russia, they believe that installment plans pose risks for buyers, developers, and banks: the cost of money is already built into apartment prices, and the client’s debt burden is not always assessed. Therefore, the Central Bank recommended that banks take into account the share of installment plans when lending to developers and create additional reserves.
According to Dom.RF, in July the coverage of project financing by funds in escrow accounts fell to 64.6% from almost 70% at the beginning of the year. In the second quarter, a third of developers had not had a single terminated installment contract, while the rest had no more than 10 such terminations, and the share of mortgage arrears did not exceed 2%.
Sources
